Build or Buy Risk Factors for Compliance Software: How to avoid builder’s remorse

When deciding on a software solution for your business, first and foremost, it is important to determine what you need the software to solve, and then decide if buying a pre-built solution is right for your business or if the build route is the way to go. There are many factors to consider including cost, implementation time, customization, scalability, user experience, which vendor to use, etc. It can be difficult to know if you are making the right decision and there is a certain level of risk involved.

Risk is unavoidable in every build or buy scenario. But when it comes to compliance software decisions for example, the stakes are even higher. We focus so much on the cost of getting it right, that we often fail to consider the very real cost of getting it wrong.

For lenders this could mean heavy fines and impact to business due to failed industry compliance standards. In addition to the tangible financial risks, there can also be reputational risk that tends to linger over time and impact future business prospects.

How do you stand up your risk and compliance programs? What factors go into the build or buy decision framework? How do you make a decision you won’t end up regretting?

In general, the best approach is to engage in a thorough and thoughtful decision-making process that considers three key aspects: (1) initial and ongoing costs; (2) implementation time; and (3) customization to your particular products and services, to your existing systems and staff, and to your anticipated scale.

Those considerations absolutely apply to risk and compliance solutions, and I would add that lenders need to consider other factors.

Builder’s Remorse

We’ve all heard about buyer’s remorse, but what’s less talked about is builder’s remorse. It certainly can make sense for some lending institutions to check the boxes covering the three considerations of cost, time and customization and go on to build their own solutions. A lot of work, time and industry knowledge goes into getting it right and oftentimes, lenders don’t have the resources or expertise to achieve the benefits of building their own solutions.

I typically see builder’s remorse in these scenarios:

• Resources Issues – IT teams are stretched and often don’t have staff or time to devote to building a new system.
• Customer Impact – often taking time to build a new system means that resources that should be going into serving customers, end up being diverted into the new system and as a result, customer’s take the hit.
• Speed – Creating a system from scratch often takes longer. Resources may need to be hired, plans have to be made, and complicated interfaces and integrations must be configured and tested. During the building process, the world keeps moving and requirements continue to pile up, all leading to possible delays.
• Compliance and Industry Knowledge – Think about when you first started in this business. You likely soon realized that whether you were a lender, forwarder or an agent, you were operating in an extraordinarily regulatory environment and ecosystem. Then, just when you had it down, regulations changed, technology evolved, and expectations grew. This is a complicated environment to operate in, much less to build a new system in.

The cost of getting any of this wrong through the trial and error of building from the ground up could be very high indeed.

Buyer’s Guidelines

If you choose to buy, you’ll want to carefully research software providers to ensure proof of concept and use. Take a good look at their customer base – how are these customers faring in terms of compliance and recovery rates? Ask tough questions about the support and training the company provides. Find out how responsive they are. Understand how they operate and fit into the recovery ecosystem.

Finally, learn about the company’s track record and values. What is their promise to you? And, importantly, what is their commitment to the industry?

One thing is certain; our industry remains complex, and regulations may change, but they will never go away. Lenders must choose solutions that put them in a position to succeed, that enable them to confidently make promises to their stakeholders, and that mitigate their risk – not increase it.